For backpackers in Australia, superannuation can be seen as a savings account where the money you save can be claimed back when you leave. Superannuation is a compulsory scheme in Australia where employers are required to make payments into a superannuation fund for employees to access, usually in their retirement.

Australia’s superannuation scheme was initially implemented to reduce the financial pressure the government faced in providing Australian citizens with an old age pension after they retired from the workforce. While the superannuation scheme is a life long investment for permanent residents and citizens of Australia, backpackers and those on working holidays in Australia are able to take advantage of the short term benefits.

Even though backpackers and people on working holidays in Australia won’t be living in Australia after they retire, they can still gain access to their superannuation funds once they depart from Australia. All people employed within Australia that earn more than $450.00 per month are entitled to superannuation payments.

Australia’s superannuation scheme provides an opportunity for backpackers and other people on working holidays in Australia, to not only work and enjoy all that Australia has to offer, but also the option to have access to significant savings when they leave Australia. It is a great opportunity for backpackers and other people on working holidays in Australia to not be in a financially vulnerable position when they return to their home country.

Legal Requirements for Employers

It is a requirement under Australian law for an employer to pay 9.5% of a workers wages into a recognised superannuation fund after an employee earns $450.00. This is known as the Superannuation Guarantee.

So if a backpacker working in Australia is paid $1000.00 a week, their employer is required to make a superannuation payment of $95.00. While it may not seem like a lot of money being put into a superannuation account, many backpackers soon find out how quickly the amount accumulates.

The legal requirement for employers to make superannuation payments for backpackers and other people on working holidays in Australia provides them with a guaranteed savings plan that is only accessible once they leave Australia.

Choosing a Superannuation Fund

Backpackers who are working in Australia are able to choose the superannuation fund that they want their superannuation paid into. Backpackers and other people on working holidays in Australia should seek independent advice on the range of superannuation funds and which of those superannuation funds will give them the best return. This will ensure backpackers and people on working holidays in Australia are able to achieve the highest return possible on their superannuation savings when they leave Australia.

It is wise for backpackers and people on working holidays in Australia to only use one superannuation fund. Different employers and different industries within Australia all have preferred superannuation companies; it is not uncommon for an employer to provide you with details of the superannuation firm that they prefer so they can make payments into that fund.

The problem for backpackers and people on working holidays in Australia is that they then end up with multiple superannuation accounts with small superannuation amounts.

By staying with the same superannuation fund backpackers and those on working holidays have all of their superannuation funds in the one account. Most importantly this provides backpackers and those on working holidays in Australia a higher return due to interest being accumulated on the whole amount in the one superannuation fund.

What Superannuation Funds are Available for Backpackers?

There are numerous superannuation funds available for backpackers and others on working holidays in Australia. The key is for backpackers and people on working holidays in Australia to choose the right fund for their individual needs.

Industry Superannuation Funds – As the name suggests, Industry Superannuation Funds were originally implemented for people working within specific industries such as construction, agriculture and health care.

Employer Superannuation Funds – Employer Superannuation Funds are established by employers so that their employees have access to a convenient superannuation fund. Some employer Superannuation funds are compulsory for some employees such as local government and state government employees.

Personal Superannuation Funds – These are superannuation funds that people join individually, and allow employees to keep all of their superannuation in the one superannuation account. Personal Superannuation Funds are a preferable option for backpackers and people on working holidays in Australia as they allow for all of the superannuation to be held in the one account.Continue Reading

Even though backpackers and people on working holidays in Australia won’t be living in Australia after they retire, they can still gain access to their superannuation funds once they depart from Australia. All people employed within Australia that earn more than $450.00 per month are entitled to superannuation payments.

Australia’s superannuation scheme provides an opportunity for backpackers and other people on working holidays in Australia, to not only work and enjoy all that Australia has to offer, but also the option to have access to significant savings when they leave Australia. It is a great opportunity for backpackers and other people on working holidays in Australia to not be in a financially vulnerable position when they return to their home country.

Legal Requirements for Employers

It is a requirement under Australian law for an employer to pay 9.5% of a workers wages into a recognised superannuation fund after an employee earns $450.00. This is known as the Superannuation Guarantee.

So if a backpacker working in Australia is paid $1000.00 a week, their employer is required to make a superannuation payment of $95.00. While it may not seem like a lot of money being put into a superannuation account, many backpackers soon find out how quickly the amount accumulates.

The legal requirement for employers to make superannuation payments for backpackers and other people on working holidays in Australia provides them with a guaranteed savings plan that is only accessible once they leave Australia.

Choosing a Superannuation Fund

Backpackers who are working in Australia are able to choose the superannuation fund that they want their superannuation paid into. Backpackers and other people on working holidays in Australia should seek independent advice on the range of superannuation funds and which of those superannuation funds will give them the best return. This will ensure backpackers and people on working holidays in Australia are able to achieve the highest return possible on their superannuation savings when they leave Australia.

It is wise for backpackers and people on working holidays in Australia to only use one superannuation fund. Different employers and different industries within Australia all have preferred superannuation companies; it is not uncommon for an employer to provide you with details of the superannuation firm that they prefer so they can make payments into that fund.

The problem for backpackers and people on working holidays in Australia is that they then end up with multiple superannuation accounts with small superannuation amounts.

By staying with the same superannuation fund backpackers and those on working holidays have all of their superannuation funds in the one account. Most importantly this provides backpackers and those on working holidays in Australia a higher return due to interest being accumulated on the whole amount in the one superannuation fund.

What Superannuation Funds are Available for Backpackers?

There are numerous superannuation funds available for backpackers and others on working holidays in Australia. The key is for backpackers and people on working holidays in Australia to choose the right fund for their individual needs.

Industry Superannuation Funds – As the name suggests, Industry Superannuation Funds were originally implemented for people working within specific industries such as construction, agriculture and health care.

Employer Superannuation Funds – Employer Superannuation Funds are established by employers so that their employees have access to a convenient superannuation fund. Some employer Superannuation funds are compulsory for some employees such as local government and state government employees.

Personal Superannuation Funds – These are superannuation funds that people join individually, and allow employees to keep all of their superannuation in the one superannuation account. Personal Superannuation Funds are a preferable option for backpackers and people on working holidays in Australia as they allow for all of the superannuation to be held in the one account.

Self Managed Superannuation Funds – Self Managed Superannuation Funds are essentially a superannuation fund that an employee manages themselves. They provide greater flexibility in the way that employees can invest their superannuation but are usually used by higher income earners. The requirements involved in establishing a Self Managed Superannuation Fund outweigh the benefits for backpackers or other people on working holidays in Australia, so are not recommended.

Superannuation Investments

The money that employers deposit into superannuation accounts on behalf of their employees is invested by the superannuation fund. The way the funds are invested by the superannuation funds is dependent upon the choice of the employee.

Some investment options are higher risk, such as market linked investments, but can offer and higher return, while other investment options are more conservative and safe, but offer a lower return.

It is up to the individual backpacker or person on a working holiday in Australia how they want their superannuation invested. However, before making any decisions, the backpacker or person on a working holiday in Australia is advised to seek financial advice to ensure they are making the right superannuation investment choices.

Claiming Your Superannuation When You Leave Australia

Every year thousands of backpackers and people who have been on working holidays in Australia, leave without claiming their superannuation entitlements. Many of these people don’t realise that they are entitled to claim their superannuation when they depart Australia after being a temporary resident.

This has left millions of dollars in unclaimed superannuation left sitting in superannuation funds. It is important for backpackers and other people who have been on working holidays in Australia to understand that they can claim their superannuation entitlements through the Departing Australia Superannuation Payment. This payment is commonly known as het DASP.

Even if backpackers have already left Australia without claiming the Departing Australia Superannuation Payment that can still claim it at a later date, although they will have to contact the Australian Tax Office, as superannuation funds are required to send them any unclaimed superannuation.

Taxation on Superannuation

Not many good things come without an element of taxation and Australia’s superannuation scheme is no different.

Superannuation is interest bearing and also comes way of taxable income, so as a result the superannuation you are paid through the Departing Australia Superannuation Payment is considered to be taxable income. Depending upon how much superannuation a backpacker or person on a working holiday in Australia has accumulated will affect the level of tax they will be required to pay.

The Australian Tax Office provides a number of tables which identify the tax payable when you access your superannuation funds but essentially the tax rates for a Departing Australia Superannuation Payment, are as follows:

Tax Free Component – 0% tax;

Taxed Element of a Taxable Component – 35% tax; and

Untaxed Element of a Taxable Component – 45% tax.

As identified above, the amount of superannuation accumulated ultimately dictates the level of tax required to be paid. The more superannuation that a backpacker or person on a working holiday has the more tax they will be required to pay to the Australian Tax Office.

What are the Requirements for a Former Temporary Resident to Claim the Departing Australia Superannuation Payment?

While it is easier for backpackers and other people who have been on working holidays in Australia to claim the Departing Australia Superannuation Payment when they leave, it is still possible to claim it at a later date. They are however required to show that are a former temporary resident of Australia.

A former temporary resident is classified as a person who has departed Australia at least six months earlier and their temporary visa has with been cancelled or has expired. However a person is not considered a former temporary resident if:

An Australian or New Zealand citizen;

Hold permanent residency in Australia; or

The holder of a Subclass 410 or Sub Class 405 visa.

So long as a former backpacker or person who was on a working holiday in Australia is able to meet the above requirements then they will also be able to access their Departing Australia Superannuation Payment.

Prior to making application for the Departing Australia Superannuation fund, former temporary residents are advised to seek detailed advice, so that the funds can be obtained without any financial implications.

Conclusion

Many backpackers and people on working holidays in Australia will not even consider the benefits of superannuation before they come to Australia. More concerning is that there will be a lot of backpackers and people who have had working holidays in Australia that will not even access their superannuation when they eventually depart from Australia.

Superannuation provides numerous financial benefits for backpackers on people on working holidays in Australia. Essentially the more that they earn during their stay in Australia the more superannuation they can access when the eventually depart Australia. While there are taxation implications for accessing superannuation, backpackers and those who have been on a working holiday in Australia can also offset the tax paid through any employment expenses they have incurred.

It is important that backpackers and people who are on working holidays in Australia seek advice about the right superannuation fund for their particular circumstances and also how their superannuation funds are invested. As backpackers and people on working holidays in Australia are only here temporarily, the superannuation investment method that they ultimately choose will be different to Australians whose funds are long term investments.

While superannuation is a long term nest egg for many Australians, the benefits that Australia’s superannuation scheme provides to backpackers and those on working holidays in Australia provides a short term savings and investment opportunities. These opportunities ultimately benefit backpackers and people on working holidays when they eventually leave Australia with easy access to cash funds.

The key for backpackers and those on working holidays in Australia is to obtain detailed advice on the best superannuation funds and investment strategies. By obtaining expert advice backpackers and those on working holidays in Australia will be able to not only enjoy working and exploring Australia, but they will also have the confidence that they have sufficient funds when they return home.